Getting Transit on the Right Track

Urban Transit: The Private Challenge to Public Transportation, edited by Charles Lave, San Francisco: Pacific Institute for Public Policy Research, and Cambridge, Mass.: Ballinger, 372 pages, $12.95 paper

In late August the New York newspapers were full of news of the 63rd St. tunnel under the East River. After some 12 troubled years of construction and close to a billion dollars of expenditures on this new four-track subway link between midtown Manhattan and Queens, it was revealed that the never-used under-river tubes have leaky walls that have led to feet-deep water and rusting track and electrical gear. Moreover, the contractor somehow left out yards of concrete that he was paid to pour. New York subway officials admitted to the tunnel being a major "debacle."

In the private sector, such massive managerial negligence would knock many points off the stock price of the corporation concerned, making it more vulnerable to takeover and the removal of its senior officers. There would be some resignations or dismissals. The company might even go broke. And the knowledge of such consequences would serve to discourage such a fiasco in the first place. But at the Metropolitan Transportation Authority in New York in August, it was all just noisy expressions of shock, a "thorough investigation" instituted, promises of prosecution if the villains can be found, and so on. No resignations or dismissals, no threat to the entrenched incompetents. In the taxpayer-underwritten government, it's usually just a public-relations show of concern to cover up the ongoing waste-as-usual.

You'd think there'd be some passionate indignation about such waste and the institutional arrangements that allow it to go unpunished and uncorrected. It is extraordinary that such debacles should happen and keep on happening, literally right under the feet of tens of thousands of the world's most brilliant specialists in corporate finance and management, and that the city that is still unrivaled as the capital of world capitalism should just shrug its shoulders fatalistically and say there's nothing really to be done. The subways, they go on saying incorrectly, just have to be misrun by government.

Perhaps books such as Urban Transit are part of the reason. It is a major attempt to dissect our transit system and its institutionalization of urban waste, but there's not the tiniest spark of indignation, not the slightest flash of passion for reform in one of the contributors. Most of the 14 chapters are ever-so-polite to everyone, ever-so-careful not to overstate the case for privatization and reform of transit. But they are so well mannered and inoffensive that there is a danger the volume will slip quite unnoticed into the ocean of public-policy reportage, even though there's some excellent stuff in there that deserves attention.

It has flaws. Kenneth Orski lists Washington, D.C., which I happen to know, as a place where local businesses are sharing the cost of running downtown trolleys. Let him be informed that the only trolleys in downtown D.C. are the ones you push yourself in the supermarket. When I see a howler like that, I start to worry a little about the care with which the great processions of examples in this book have been compiled, but I think I cite an exceptional error. The book has a careful tone about it and is generally well served by displays of data.

Overall, it is a very professional and important handbook presenting the powerful case for a reversal of the tide of bureaucracy and politics that has swamped urban transit as it has been taken over by government in the past three decades or so. The general case is made for policies that move transit back under the influence of market forces through deregulation, to allow more competition and a new choice of services; through privatization; and where this isn't politically possible, through government contracting out of transit operations to businesses.

John Meyer's foreword to the book is a masterful summary of the fundamental economic forces creating trouble for transit managers. The scarcity and high cost of central city land has spawned a decentralization of jobs toward the outskirts of our rapidly expanding metropolitan areas, so the trips people want to make no longer fit the old hub-and-spoke radial pattern that bus and especially rail transit are suited to handling. Moreover, the continuing rise in labor costs and the resulting substitution of capital for labor that we see all around us, in offices and factories and homes, takes the form of the automobile when it comes to transportation. But transit monopolies, being large and unused to competition, are unadaptive.

Charles Lave elaborates this. In four decades of transit being taken from commercial companies and organized into government authorities with access to subsidies, there has been an extraordinary slide in transit productivity. From modest organizations designed to give shareholders and employees a living out of providing commuters with transit service they were prepared to pay for, the transit entities have been transformed into grandiose engines of social improvement and transformation, expected to banish pollution, curb suburban sprawl, provide a social service to the handicapped, be "affordable" to all, etc. Lave speculates that it is perhaps an inherent danger of any government-run project that it gets asked to "solve everyone else's pet problem, rather than being allowed to simply function in an efficient manner." Lave proceeds through the economic arguments for government monopolization of transit and finds each baseless.

George Hilton provides an original, meaty, and fascinating historical account of the rise and fall of monopolized transit, which I won't attempt to summarize. Actually, I suspect Hilton and Lave are jumping rather farther than the present predicament of transit warrants in postulating, respectively, a "crisis" and a "fall" of monopolized transit. Despite all the arguments against it, the US Congress continues to dole out billions to monopoly transit, which has remarkable political staying power.

Several good chapters show the financial viability of nonsubsidized urban transit. Commercially operated commuter bus services, van-pools, bus-pools, and subscription-bus services around America are examined in another chapter. And Gabriel Roth takes the examination overseas, where in many otherwise-regulated and often socialistic countries there are examples of transit more enlightened and free than anything America—Calcutta's and Australia's private buses; Manila's jitneys; the minibuses of Buenos Aires, Nairobi, Hong Kong, and Kuala Lumpur; and shared taxis in Northern Ireland, Mexico City, and Caracas.

The only really disappointing chapter is Sandra Rosenbloom's one concentrating on the taxi. She is not impressed by the results of taxi deregulation in several cities in the last few years. She cites complaints of price gouging, overcrowding of airports, and lack of innovation: "Free market private taxis simply don't act like entrepreneurs in a free market."

What's this? Has Rosenbloom discovered the taxi driver as a new super-bureaucratic being, unresponsive to economic opportunity, unwilling to experiment or change, blind to new ways of doing things? Piffle!

Markets transform industries with even only a few entrepreneurs working at the margin, and the taxi business will attract and be shaped by such innovators like all other industries if given the chance. Half the trouble with the deregulation that's been tried is that it's so partial. Liberalization of entry into the business is described as deregulation, even as the responsiveness of the industry to the market is still distorted by remaining regulations—fare controls and rules against contract service, group riding, and the use of fixed routes and pick-up points.

With the exception of Rosenbloom's chapter, however, this is an excellent, if unimpassioned, discussion of the case for deregulating urban transit. That case is best summed up by Gabriel Roth: "The key advantage of the private operations is that, in order to survive, the operator has to seek out and efficiently provide services that the public wants to use and is prepared to pay for. The municipal operator is under no such constraints and is unable to resist political pressures to raise costs and serve underutilized routes."

Contributing Editor Peter Samuel is a journalist based in Washington, D.C.